Types of Alternative Investments in India

Alternative investments refer to financial assets that do not fall into the conventional investment categories, such as stocks, bonds, or mutual funds. These investments are often used to diversify investment portfolios and reduce risk. 

Traditional investment instruments like fixed deposits, provident funds, and stocks are typically the preferred choice of Indian investors. However, the popularity of alternative investments has been growing due to the potential for high returns.

Types of Alternative Assets

Here are some types of alternative investments that are prevalent in India.

1. Real Estate

Real estate is one of the most popular forms of alternative investments in India. This includes investing in residential properties, commercial properties, and Real Estate Investment Trusts (REITs). Real estate could provide steady cash flow in the form of rent and potential appreciation over time.

2. Gold and Other Precious Metals

Precious metals like gold, silver, and platinum are considered a form of alternative investment. They are often used as a hedge against inflation and currency fluctuations. In India, traditional and risk-averse investors prefer to invest in gold in the form of jewellery or coins. 

3. Art and Collectibles

Investing in art and collectibles such as vintage cars, coins, stamps, and other rare items has gained popularity in India. These assets can appreciate over time and can be a good store of value.

Benefits of Investing in Alternative Investments

Alternative investments can offer several benefits:

Diversification

They can help diversify your portfolio as an alternative to traditional or popular investment avenues

Potential for Higher Returns

Some alternative investments have the potential for providing higher returns, depending on the asset the

Inflation Hedge

Certain types of alternative investments, like real estate and commodities, can act as a hedge against inflation

Lower Volatility

Unlike traditional or market-linked tools, these investments are often exposed to less volatility

Drawbacks of Opting for Alternative Investments

Before investing in alternative assets, it’s crucial to consider the following disadvantages:

1. Higher Risk: Alternative investments are speculative in nature, illiquid, and vulnerable to market shifts and regulations

2. Lack of Liquidity: Many alternative investments, like real estate, are illiquid, making it challenging to access funds when needed

3. Complexity: Understanding alternative investments demands expertise and research, limiting accessibility for novice investors

4. Regulatory Oversight: Some alternative investments may not be regulated, increasing the risk of fraud